According to a recent report from investment bank Jefferies, Bitcoin (BTC) mining profitability declined slightly in July compared to the previous month.

The analysis points to a decline in Bitcoin price as the primary factor affecting miners’ margins. As a result, the institution decided to cut the target price for Wall Street’s largest Bitcoin miner, Marathon Digital Holdings (Nasdaq: MARA), by more than 20%.

Bitcoin Mining Profitability Drops in July, Jefferies Reports

The cryptocurrency’s value fell by more than 6% in July, while the network’s hashrate — a measure of computing power dedicated to mining — remained relatively stable. This combination of factors put pressure on mining activity, despite an increase in the share of production for U.S.-listed companies.

Analysts at Jefferies noted that publicly traded mining firms expanded their collective output, capturing 21.1% of total Bitcoin production in July, up from 20.7% in June. This growth in market share was attributed to these firms bringing new capacity online faster than overall network expansion.

It appears Jefferies is lowering its price target on Marathon to $17.

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Marathon Digital Holdings, a prominent player in the sector, stood out with a notable increase in production. The company mined 692 bitcoins in July, which represents a 17% increase from the previous month. Marathon continues to lead the industry in terms of installed hashrate capacity.

Riot Platforms also significantly increased its production by 45%, producing 370 BTC last month, which is 115 BTC more than the previous month. However, not all companies experienced such positive results. Argo Blockchain only managed to produce 48 tokens, which is a 63% drop from June. The fact that the price of Bitcoin is currently 21% below its all-time highs certainly doesn’t help matters.

MARA shares approach fair value

Looking ahead, Jefferies expects more challenging conditions for miners in August. The bank’s report highlights a further 5% drop in Bitcoin’s price since the start of the month, coupled with renewed growth in network hashrate, which could squeeze profit margins even further.

In light of these developments, Jefferies has revised its outlook for Marathon Digital, cutting its price target on the company’s stock from $22 to $17, while maintaining a “hold” rating.

Is Jefferies right? Only time will tell. For now, Marathon Digital Holdings is taking steps to capitalize on lower Bitcoin prices by purchasing $249 million worth of BTC.

“We currently own and operate approximately 54% of the 1.1 gigawatts of power in our diversified portfolio of digital asset compute,” said Fred Thiel, chairman and CEO of MARA. “We will grow owned and operated sites to represent a larger percentage of our fleet over time and expect to see cost savings on a cost per petahash basis as we do so. Longer term, our goal is to be among the lower-cost operators in the industry.”

The changing landscape of Bitcoin mining underscores the industry’s sensitivity to fluctuations in cryptocurrency prices and network dynamics. As the industry continues to mature, miners face the ongoing challenge of balancing operational costs with volatile market conditions.

The Q2 2024 results released by HIVE Digital Technologies (NASDAQ: HIVE) and TeraWulf (NASDAQ: WULF) showed that Bitcoin miners are able to withstand negative market changes following the recent halving. HIVE increased its revenue by 37%, while WULF saw a 130% increase.

This article was written by Damian Chmiel on www.financemagnates.com.